HomeMy WebLinkAbout9C - Revisions To TIF Policy
MEETING DATE:
AGENDA #:
PREPARED BY:
AGENDA ITEM:
DISCUSSION:
16200 Eagle Creek Avenue S.E.
Prior Lake, MN 55372-1714
CITY COUNCIL AGt:NUA Kt:~Of( r
August 16, 2004
9C
John Sullivan, Community Development Director
CONSIDER APPROVAL OF REVISIONS TO TIF POLICY FOR THE CITY OF
P~ORLAKEANDP~ORLAKEEDA
Historv: The City of Prior Lake adopted a Tax Increment Finance (TIF) Policy on April 16,
2001. In determining that the City wants to provide a TIF subsidy to a business or qualified
recipient, the City will need to re-examine the policy and new requests based on the
passage of time and development trends since the initial policy; new changes in the 2004
City Comprehensive Plan; the 2020 Vision; McComb Retail Report January 2004; the
current development of the Deerfield Industrial Park; and the proposed addition of a new
Business Subsidy Policy. All these elements have combined to necessitate revisions to the
existing TIF Policy to retain consistency and provide future direction.
The purpose of this report is to recommend revisions to the 2001 TIF Policy.
Current Circumstances: Significant changes have been made to TIF by the State
Legislature since the present City TIF Policy was developed. Accordingly, the staff
is proposing a revised TIF Policy to guide the decision-making process when
considering future TIF requests.
Shown below are proposed revisions to the 2001 policy:
1. Program Goals, #8: The existing goal states, liTo provide high density housing
in the Downtown (C-3) zoning district and to assist in the development of other
housing in the community that is consistent with City goals and policies and is
generally not being provided by the private sector."
Staff recommends that we retain this language, but add a provision for only using
TIF if the project is a mixed use project which includes a commercial component,
similar to Lakefront Plaza. The rationale for changing existing Goal #8 is based on
the McComb Retail Report of January, 2004. It recommended reducing the number
of acres dedicated to high density residential from 636 to 60, a major reduction.
Staff recommends the language of Program Goal #8 be changed to read as follows:
"To provide high density housing, as part of a mixed use development
including retail and/or office uses in select areas of the C-3 zoning district and
other appropriate areas as deemed appropriate by the City Council.
2. Program Goal, #9: Add a new goal which reads:
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Phone 952.447.4230 / Fax 952.447.4245
"To provide TIF assistance, consistent with the TIF Policy, Business Subsidy
Policy, Comprehensive Plan and Zoning Ordinance of the City, to eligible
companies planning to build TIF eligible businesses in the Deerfield Industrial
Park and other areas zoned Industrial.
This goal recognizes that the City Council places a high priority on developing this
business park and industrial area.
3. Program Eligibility Criteria #9: Change the maximum public money invested
from $10,000 to $30,000 to keep the City competitive with other cities and economic
development organizations.
4. Program Eligibility Criteria #12 provides the language to read as follows:
"TIF will not be used in projects that would give a significant competitive financial
advantage over similar projects in the area, unless there are special
circumstances that warrant the investment of TIF dollars for the project, such
as a substantial increase in high quality jobs, a competitive business may be
known to be exiting the area, a local competitive business may have
announced it is quitting business, the other competitive business provides
evidence that it is amenable to the competitor, etc. Developers must provide
information to the City to demonstrate that this criterion is met."
The rationale behind this change is to allow the City more flexibility options to
consider projects that may provide significant benefits and serves a public purpose.
These types of business would be ones that create a substantial increase in the
city's tax base, utilize or develop new technology, pay higher wages and provide
attractive employee benefits.
5. Program Eligibility Criteria #13 provides to add the following language:
"For TIF benefit of more than $25,000, the applicant must sign a Business
Subsidy Agreement with the City/EDA."
The rationale behind this addition is to ensure compliance by businesses and to
provide consistency with reporting requirements to the state of Minnesota in
handling Business Subsidies. The State of Minnesota recommends cities adopt and
enter into agreements for business subsidies and to reference them in development
agreements as an attachment. Staff recommends following this procedure. Staff
has developed a draft Business Subsidy Agreement that it will present when the first
applicant for assistance has applied.
6. Program Eligibility Criteria #14 provides to add the following language:
"For an applicant to receive TIF assistance from the City, it must demonstrate
that it will create a majority of jobs (at least 60% of new employees) to be
classified as those that pay at least $9.00 per hour or higher exclusive of
benefits."
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The rationale for including this language is to guide the City's investments to provide
a higher return on human capital. Many state development agencies and economic
development organizations in Minnesota and across the county are advocates for
providing "living wages". 'living wages" are a tool to help reduce poverty. The State
of Minnesota and several cities have been innovators in this movement. The
rationale for requiring living wages is based on the philosophy that'if government is
going to "subsidize" private business, it should not assist companies that pay low
wages which contribute to poverty.
Conclusion: The revisions proposed herein will render the 2004 TIF Policy
consistent with existing laws, City Council policies as set forth in the City's 2020
Vision and Strategic Plan and City Code.
ALTERNATIVES:
1. Discuss the 2004 TIF Policy and refer to the EDA for review.
2. Refer the 2004 TIF Policy revisions back to staff for more research and return to
report at a future meeting.
3. Take no action.
RECOMMENDED
MOTION: Alternative 1.
REVIEWED BY:
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16200 Eagle Creek Avenue S.E.
Prior Lake, MN 55372-1714
CITY OF PRIOR LAKE
ECONOMIC DEVELOPMENT AUTHORITY
TAX INCREMENT FINANCING POLICY
ADOPTED BY THE CITY COUNCIL APRIL 16,2001
AMENDED BY THE COUNCIL ON AUGUST 16, 2004
PURPOSE
This policy is established to outline the City's position on the use of tax increment
financing (TIP) policy for private development. This policy will be used as a guide in
processing and reviewing applications for tax increment financing assistance. In
accordance with the TIF policy, TIF requests must comply with applicable state statutes.
The City of Prior Lake is governed by the limitations established in Minnesota Statutes
Chapter 469.1 74, the Minnesota Tax Increment Financing Act, for all districts created
after August 1, 1979.
PROGRAM GOALS
This program exists to achieve the following goals:
1. To promote commercial, industrial and residential development under special
circumstances that would otherwise not occur.
2. To increase and diversify the long-term tax base of the City in order to ensure the
ability of the City to provide adequate services for it's residents while lessening
reliance on the residential property tax.
3. To improve the City's economic vitality through the creation and expansion of
employment opportunities.
4. To remove blight and encourage redevelopment in the commercial and industrial
areas of the City in order to encourage high levels of property maintenance and
private reinvestment in those areas.
5. To assure that projects are constructed and maintained at a level of quality consistent
with the goals of the City of Prior Lake.
6. To retain local jobs, increase the local job base and provide economic diversity in that
job base.
7. To assist in achieving other goals contained in adopted public policies as may be
adopted by the City Council from time to time, including without limitation, quality
design and construction, energy conservation and reductions in the capital and
operating costs of government.
8. To provide high density housing as part of a mixed use development which
includes retail and office uses, in select areas in the C-3 zoning district and other
areas as may be deemed appropriate by the City Council.
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www.cityofpriorlake.com
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Phone 952.447.4230 / Fax 952.447.4245
9. To provide TIF assistance, consistent with the TIF Policy, Business Subsidy
Policy, Comprehensive Plan and Zoning Ordinance of the City, to eligible
companies planning to build TIF eligible businesses in the Deerfield
Industrial Park and other areas zoned Industrial.
PROGRAM ELIGIBILITY CRITERIA
Qualified projects should meet or exceed the following criteria to be eligible for TIF
assistance. Meeting the threshold of eligibility does not guarantee approval of the project
by the City. Conversely, failure to meet the criteria will not automatically exclude a
proposal from further consideration. Final approval of any project will be made by the
City Council.
The project must be consistent with the City's Comprehensive Plan, zoning ordinance
and other applicable City ordinances as well as applicable state statutes
1. The project shall meet at least one of the Program Goals listed above.
2. The applicant must be willing to enter into a development or redevelopment
agreement satisfactory to the City.
3. It must be demonstrated that the project would not be financially feasible but for the
public assistance to be provided. The level of TIF financing shall be reduced to the
lowest possible level.
4. The project must comply with all applicable environmental regulations.
5. The applicant must submit all ~f the materials required in the application.
6. The applicant must agree to provide surety to the City to cover all costs paid by the
increment, unless the project is a "pay as you go" agreement. These may include
assessment agreements, letters of credit, personal deficiency guarantees, guaranteed
maximum cost contracts and minimum payment agreements.
7. The applicant/developer must provide a minimum of 10% equity in the project.
8. The City Council will favor owner-occupied projects over projects that will be leased.
9. For projects in an Economic Development District, a maximum of $30,000 of public
money will be invested for each full-time equivalent position created or retained.
10. For projects in Redevelopment Districts, those that remove or prevent blight will be
favored.
11. For projects in Redevelopment Districts, a ratio of taxes paid before and after
redevelopment of 1:2 is desired.
12. TIF will not be used in projects that would give a significant competitive financial
advantage over similar proj ects in the area, unless there are special circumstances
that warrant the investment of TIF dollars for the project, such as a substantial
increase in high quality jobs, a competitive business may be known to be exiting
the area, a local competitive business may have announced it is quitting business,
the other competitive business provides evidence that it is amenable to the
competitor, etc. Developers will provide information to the City to demonstrate
that this criterion is met. The developer should be able to provide market data,
letters of intent or financial statements that illustrate the market potential or demand
for the proj ect.
13. In order to be eligible to receive TIF benefits exceeding $25,000, the applicant
must sign a Business Subsidy Agreement with the City/EDA.
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14. For an applicant to receive TIF assistance from the City, it must demonstrate
that it will create a majority of jobs (at least 600/0 of new employees) to be
classified as those that pay at least $9.00 per hour or higher exclusive of benefits.
The applicant for assistance must complete an Application for TIF Assistance pursuant to
the procedures outlined in the Application.
PROJECT COSTS ELIGIBLE FOR TIF ASSISTANCE
Project costs that qualify for TIF assistance include the following:
. Property acquisition
. Land clearance
. Relocation and demolition of structures
. Site preparation
. Soils correction
. Removal of hazardous wastes or remediation of site contamination
. Installation of utilities
. Construction of public or private improvements
. Administrative costs directly related to the identified parcels.
. Design fees
. Surveys
. Environmental studies
. Relocation of building occupants
. Rehabilitation of structures
. Special assessments
. Other costs allowed by Minnesota Statutes
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